Adapt to survive: just in time for the just in time economy
by Heather Lawrence, head of JLL’s industrial and logistics team in Cardiff office
Article - Described by one Welsh automotive components maker as “the perfect storm,” recent announcements by major UK car manufacturers have caused understandable nervousness in an industry that employs 18,000 people in Wales and is worth £3.2bn to the Welsh economy.
It has of course ever been thus - organisations need to adapt to survive. This is just as true of the properties that house this economic powerhouse for Wales as it is of the businesses themselves.
Whilst industrial and logistics is currently outshining all other property sectors in terms of investment returns, we are also seeing a vast amount of old stock converted to new uses. This is great news for the growing leisure industry – bringing everything from indoor trampoline centres to inflatable arenas to the families of Wales. And where some former industrial sites are overhauled to make way for new residential developments, it’s great news for growing communities in need of new homes.
But maintaining the right balance is crucial. The industrial property sector needs to invest in and deliver new, contemporary industrial stock, designed around the just-in-time economy and manufacturing supply chains that have become so crucial to South Wales. From double-ended distribution centres that speed goods in and out to controlled environments for precision engineering, we must ensure our industrial facilities attract and retain the dynamic, growing businesses that offer high skilled jobs and opportunities.
So we must also focus on the delivery of new stock - and there are positive signs. Rentals and capital values are at or approaching levels where speculative development – ie a developer builds a facility to let or sell once complete, rather than purpose-built for a specific occupier – is possible in a handful of prime, mostly M4 corridor or city-based locations.
Elsewhere in Wales there is usually a development feasibility gap which needs to be plugged by public sector intervention and local/national government needs to be increasingly innovative in terms of pump-priming key schemes. Councils such as Rhondda Cynon Taf are leading the way here and others need to follow suit. This isn’t a new idea – in fact a large proportion of the industrial stock in South Wales was originally built by the Welsh Development Agency or local councils.
Just as precision and design are becoming ever-more crucial to our economy, so they are too to the buildings which house that economy. JLL’s newly created supply chain department reflects the growing demand from clients to address every element of their operation from start to finish. Considering property within the context of the wider supply chain, and its associated challenges, helps companies to make holistically informed decisions about their future property investments.
That is the approach we need to take to our industrial property stock – having a holistic perspective will ensure that the sector adapts not only to survive, but to thrive.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 90,000 as of December 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.co.uk